Global Markets Meltdown?

What goes up must come down, or so I have heard. Things may shape up a bit, but I think in the long run we will see more and more of this "panic" stuff, and worse as the world's resourses are stretched thinner and thinner by more and more demand that will eventually end up in real conflicts world wide.

Let's try a game of connect the thoughts. We had good federal reserve monetary policy until Benjamin Strong died in October 1928. Government spending at ALL levels until that time except wars was 12% total. Monetary policy shift and infighting at the Fed caused the Great Depression, cut our economy in half and reduced the number of banks by 40% by the time FDR was in office (1933) Capitalism was popularly viewed to be the fault mechanism and "bread and water" was the typical solution thought up.
It was government failure that brought on the New Deal and massive social programs which according to even Keynes should have been short term stimulus and reversed down the road. We have never reduced them, we have developed a dependency on federal interference in our economy and increasingly large, wasteful and ineffective "middleman" agencies and spending. The subprime mess is primarily an easy money policy result of the ongoing mistakes in fed policy, regulatory agency representation of business instead of consumers and politicians not since Reagan but since FDR. The long term solution is that we stop expecting government bailouts, we enforce our laws, we cut the government departments and agencies that interfere with the effectiveness of markets. We have moved in America from an evolving belief and pursuit of "equality of opportunity" which inherently grows the economic pie for all of us (not just the rich) to one that is based on "equality of results" - the wasteful redistribution of income by pols and bureaucrats - which reduces the pie overall, distorts the social fabric we have and perpetuates our long term belief, need and sometimes victimization by an ever larger and more interfering federal government.
Every bullet point issue people have concerns with today and the list seems endless have at their root cause - Uncle Sam. We need less government, more self-reliance, realistic consumer expectations and savings, more volunteerism and private charity.
Almost every major charitable society you can think of had its roots in the late 1800's when we were embracing the "equality of opportunity" and some very rich people prospered and gave freely to all of us (despite what we were taught in school) and the average person's lot improved dramatically (despite what we were taught in school).
Unfortunately our intellectuals always looking at the glass half empty berated the few problems in literature and schools at the time and still do. It wasn't until the Great Depression that average people adjusted their viewpoint toward the intellectuals and we put them in the driver seat. We became a nation in slow decline from that point onward (with a few bright spots). As a nation believes, so it will become and we are trending toward a stagnant welfare nation that lives beyond it means. The baby boomers (and generation X) face their greatest challenge - will they reduce and leave the government punchbowl and go in a new direction or will they stand there and destroy the long term prosperity of our country? As Kennedy once said to them, "Ask not what your country can do for you, ask what you can do for your country".

Till the end of 2009

Well said Doug L.

I was listening to a church minister once about 10 years ago, and something he said really made me start to think. He said very much what you just said, but added that if things don't change, and if America continues on it's present course, we will eventually become a third-world-type nation - broken and destitute, with no money, no clout and no hope. I realize that it sounds far-fetched, but considering all that we are losing to other countries now, if we don't regain some real self-imposed control we will just keep sliding down the tube. America has always been a very good "market place", but if meaningful jobs keep leaving we won't have the money to do much shopping. People seem to find their own balance if left alone. I am all for LESS government, enforcement (equally) of laws and little government dependence. I am all for less greed too, both corporate and private.

Can't comprehend why no one is talking about the major contribution of defense spending and Iraq to this situation. In the past we have grown our way out of downturns through productivity gains, while the Soviets spent their way into oblivion by betting the future on a lopsided defense budget. Who is in the Soviet position now? While EU and Asia invest heavily in future economic growth and innovation, the Bush administration has been diverting national treasure away from productivity inducing programs into defense. Imagine if the money spent on Iraq had been invested instead in developing fusion power, which has seen its US funding cut. Likewise, at the micro level, one can imagine that many people who fell prey to subprime mortgages rationalized it by believing that over time they (like the US economy of old) would gradually become more productive and able to carry a heavier debt burden. Unfortunately for them, the US was squeezing capital needed for expansion out of the capital markets and into the limited sphere of defense.

In addition, what about the effect of Iraq on the price of oil? Much of the price rise has to do with the extreme uncertainty created by the backfire of our adventure in the Gulf region. And likewise, the increased cost of everything that depends on oil has diverted even more money away from investments in expansion, greater productivity, and job growth. Of course that also makes any stimulus package dangerous, since we are already in the grips of oil-induced inflation.

It's time stop obsessing about subprimes (a relatively small part of the national economy in terms of total assets at risk) and start to call this crisis what it really is: the Bush/Cheny War Recession.

No longer being the worlds superpower is not far fetched at all.